Cyprus IP Box
The Cyprus IP Box is probably the best IP regime currently available, providing amazing tax planning opportunities for your intellectual property assets.
The IP Law and tax regime in Cyprus, makes Cyprus one of the most attractive locations for setting up an IP company – largely because of the Cyprus IP Box.
Intellectual property tax planning
IP is a vital aspect of your overall tax strategy. With careful planning, you can maximize the revenue you generate from IP, while minimizing your tax liability. Tax will also be a key issue when planning your IP management company.
What is the Cyprus IP Box?
The Cyprus IP Box was first introduced in 2012, and then updated in 2016 to comply with the guidelines of the Organization for Economic Co-operation and Development (OECD).
The aim of the Cyprus IP Box was to make Cyprus the number-one international choice for companies to protect their IP and benefit financially from it.
The main feature of the Cyprus IP Box is the 80% tax exemption for revenue earned from the use of qualifying intangible assets, such as IP. Under this rule, only 20% of IP income is taxed at the corporate tax rate of 12.5%. This can mean that some Cyprus-resident companies can enjoy an effective tax rate as low as 2.5%.
Thanks to the IP Box, Cyprus is the ideal location for establishing an IP holding and development company. Cyprus offers access to a wide range of international IP rights and taxation treaties, as well as compliance with EU, OECD and WIPO standards.
What assets qualify for the Cyprus IP Box?
Qualifying assets include patents, software code and any other intangible assets that are deemed to be non-obvious, useful and novel.
Trademarks and copyrights do not qualify under the Cyprus IP Box regime, but they may still be covered by other provisions of Cyprus tax law, such as capital allowances or notional interest deduction. These other provisions can help reduce the overall effective tax rate for your Cyprus IP company.
We can advise you on which parts of your IP are covered by the Cyprus IP Box.
How the Cyprus IP Box compares to other locations
The Cyprus IP Box Regime can deliver a tax rate of 2.5% on income earned from IP assets.
No other European location can come close to that rate. The next-best rates available are Belgium at 4.44%, Hungary at 4.5% and Luxembourg at 5.2%. Those locations are followed by the Netherlands at 7%, France at 10% and the UK also at 10%.
Moreover, the Cyprus IP Box regime applies to more types of income than similar schemes. Most other European locations restrict the tax benefits to income from patents and supplementary patent certificates.
The popularity of the Cyprus IP Box
The Cyprus IP Box has proved extremely popular, and has attracted many new companies to set up in Cyprus, particularly those with digital IP.
Cities such as Limassol have developed rapidly, and Limassol now competes with major tech hubs, as a desirable location for IT investments and infrastructure. Limassol has seen an influx of tech firms, investment managers and asset management firms, and many other leading IT firms have established their headquarters in Cyprus too.
The Cyprus IP Box makes Cyprus one of the most attractive locations for setting up your IP company, and one of the most tax-efficient jurisdictions too.
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